Col R Hariharan | Sri Lanka Perspectives June 2023 | South Asia Security Trends July 2023 | www.security-risks.com
President Ranil Wickremesinghe’s efforts to
re-structure both domestic and external debt to meet International Monetary
Fund debt ceilings on debt sustainability made some progress by the end of the
month. In the wake of Sri Lanka’s
economic collapse last year, the IMF had extended nearly $3 billion External
Fund Facility. As on March 2023, Sri Lanka’s foreign and domestic debts were around
$ 41.5 billion and $ 42.1 billion.
A special session of parliament is being debt
convened on July1 and 2 to discuss and approve the plan for Domestic Debt
Optimisation (DDO).
The Central Bank Governor Nandalal
Weeresinghe briefed the media on the DDO plan. The DDO aims at restructuring
the nations domestic debt by recasting the outgoing sums of the pension funds
and offering international sovereign bondholders a repayment plan with a 30%
haircut. This means the Central Bank will convert superannuation funds,
treasury bonds and treasury bonds to longer term maturity treasury bonds.
The DDO aims to protect local banks who are
already affected by NPA by excluding them from the plan. Explaining this, the
Governor said “It is vital to protect
the banking sector, as a collapse [of it] would have a catastrophic consequence
for some 57 million depositors.” On the other hand, the DDO will transfer the burden on superannuation
funds, including the Employees Provident Fund (EPF). With these measures Sri
Lanka hopes to reduce its Debt to GDP ratio from 125% to 95%.
President Wickremesinghe has described the SL
Rs 700 billion worth DDO as a “small sacrifice” for Sri Lanka shedding the “bankrupt”
label by September.
Speaking at a meeting in Colombo, the President
appealed to the people to support the debt restructuring plan. If not, he
cautioned, “If we do this successfully, we can go forward. If we go and change
it, you go down. What will happen if we let go of this? We will immediately
lose the $700 million that the World Bank has committed. The second IMF review
will be a failure and I hope by September that Sri Lanka will be able to shed
its bankruptcy status.”
The plan to use the EPF to implement the DDO
had caused concern among trade unions. The delegation of trade union leaders
met the President. President Wickremesinghe has assured that priority was being
given to ensure protection of depositors as well as the members of the EPF. In
this respect he has asked the MPs to support necessary legislation to guarantee
9% return to EPF members.
The Committee
on Public Finance (COPF) chairman Harsha de Silva tweeted on June 30, the Committee
endorsed the DDR proposal with majority support. Opposition members had voted
against it. The chairman de Silva had expressed some reservations on the plan
affecting the EPF and superannuation funds; so he did not vote. In any case he belongs
to the main opposition Samagi Jama Balawegaya (SJB) which has decided to vote
against the DDR.
The passing of the DDR plan in parliament on
July 2 will determine not only the future course of Sri Lanka’s economic
recovery but also will determine the political fortunes of the Rajapaksas. President
appears to have embarked on a mission to get a Yes from the people for the DDR
plan, more than political factions supporting or opposing him. This may well
determine the contours of future political developments in the nation.
Among Sri Lankan leaders perhaps Wickramasinghe
is a good negotiator at the international level. But getting ‘Yes’ from the people is not easy.
In the classic book on negotiations “Getting to Yes: Negotiating Agreement Without
Giving In”, authors Roger Fisher, William Ury and Bruce Patton argue that
negotiators don’t have to choose between either waging a strictly competitive,
win or lose negotiation battle or caving in to avoid conflict.
They argue that bargainers should look at
negotiation strategies that can help both sides get a little more than they
want. This requires closely listening to each other, treating each other fairly
and jointly exploring options to increase value. Can the President whose
survival in power depends upon the how the Sri Lanka Podujana Peramuna (SLPP)
conducts itself in Parliament, carry his economic plan to its logical success?
Only time will tell, as the SLPP has its umbilical linkages to the Rajapaksas,
who are fighting their own battles.
Tailpiece: Gotabaya rides again!
Former president Gotabaya Rajapaksa is once
again in the news for all the wrong reasons. An Associated Press news report on
June 22 stated the former president has been accused of allegedly “tampering with
police records in order to hamper investigations into mass graves discovered in
an area where he was a military officer at the height of a bloody JVP (Marxist)
insurrection in 1989. The allegation was made in a report recently released by
the International Truth and Justice Project, Journalists for Democracy and
Families of the Disappeared in Sri Lanka. The report alleged that Gotabaya
while serving as defence secretary under brother President Mahinda Rajapaksa
ordered the destruction of all police recorders older than five years at police
stations where the mass graves were discovered.
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